Exam 26: Liability,defenses,and Discharge

A person whose name is forged on an instrument is liable to pay only a holder in due course the value of the forged instrument.

All parties to a negotiable instrument will be discharged when the party primarily liable on it pays to a holder the full amount due.

Ian transfers a note,for consideration,to Jock by blank indorsement and delivery.Jock transfers the note to Kelly,who takes it in good faith.What does Ian warrant to Kelly?

A signature can be made by use of any device or machine.

An authorized agent binds a principal on an instrument if the agent clearly names the principal in the signature.

Signature liability is contingent liability.

Personal defenses are used to avoid payment to an ordinary holder of a negotiable instrument,but not to an HDC or a holder through an HDC.

Bing signs a note payable to the order of Cameron.Cameron indorses the note and gives it to Daphne as payment for a debt.Daphne presents it to Bing,who pays it.Bing's payment discharges

A drawer's liability does not arise until presentment and notice of dishonor.

Chris convinces Dion,who does not understand English,to sign a $1,000 note that Dion believes is an application for a credit card.Chris negotiates the note to EZ Finance Company.Dion

Opalina asks Paolo,who does not understand English,to sign what Opalina says is an application to open a bank account.In fact,the "application" is a note.If sued on the note by an HDC

Ethel signs a note "payable to the order of Fidelity Bank." Fidelity indorses the note in blank and negotiates it to Ghani,who sells it to Huck.Liability associated with the transfer of the note from Ghani to Huck is

Warranty liability is subject to the conditions of proper presentment,dishonor,and notice of dishonor.

Transfer of an order instrument by indorsement and delivery extends warranty liability to any subsequent holder who takes the instrument in good faith.

Dale issues a check for $4,000,dated June 1,to Evelyn.The check is drawn on First Federal Bank.Evelyn indorses the check and transfers it to Gene.What will trigger the liability of Dale and Evelyn on the check?

An authorized agent is never personally liable on a negotiable instrument.

Celia,an employee of Delite Dairy Company,forges the signa?ture of Elin,Delite's president,on a Delite check and cashes it at First Federal Bank.Elin would ratify Celia's actions by

Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

Failure to present an instrument on time is not improper presentment.

Fact Pattern 26-1A (Questions A7-A8 apply) Seymour writes a check on his account at Platinum Bank to Teri to pay a debt.Teri negotiates the check by indorsement to Rosanna,who presents it for payment to Onyx Bank. -Refer to Fact Pattern 26-1A.If Onyx Bank dishonors the check,Rosanna can obtain payment from Teri